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Travel Insurance: Is It Worth It? | Travel Insurance: Is It Worth It? |
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Through the travel insurance broker InsureMyTrip.com, Suzanne Tow of New York City paid $270 to cover a $5,000 trip in May to Yosemite National Park. When the tour was canceled, Ms. Tow filed a claim with her insurer, and discovered, like so many other travelers, that travel insurance doesn’t cover cancellations because of a pandemic. | Through the travel insurance broker InsureMyTrip.com, Suzanne Tow of New York City paid $270 to cover a $5,000 trip in May to Yosemite National Park. When the tour was canceled, Ms. Tow filed a claim with her insurer, and discovered, like so many other travelers, that travel insurance doesn’t cover cancellations because of a pandemic. |
“They’re not risking a penny because they’re not paying a cent,” she said. | “They’re not risking a penny because they’re not paying a cent,” she said. |
Americans spent nearly $3.8 billion on travel protection in 2018, the latest figure available, up about 41 percent from 2016, according to the U.S. Travel Insurance Association. Now, for those contemplating traveling in an increasingly uncertain world, the question of whether travel insurance is worth buying looms large. If insurance couldn’t help with that first wave of Covid-related travel cancellations, many irate travelers ask, what exactly were they paying for? | Americans spent nearly $3.8 billion on travel protection in 2018, the latest figure available, up about 41 percent from 2016, according to the U.S. Travel Insurance Association. Now, for those contemplating traveling in an increasingly uncertain world, the question of whether travel insurance is worth buying looms large. If insurance couldn’t help with that first wave of Covid-related travel cancellations, many irate travelers ask, what exactly were they paying for? |
“Travel insurance is a line of insurance we consistently hear problems about,” said Carmen Balber, the executive director of Consumer Watchdog, a nonprofit consumer advocacy group. “It’s much less regulated than other lines of insurance and tends to include exclusions for things consumers believe they’re covered for.” | “Travel insurance is a line of insurance we consistently hear problems about,” said Carmen Balber, the executive director of Consumer Watchdog, a nonprofit consumer advocacy group. “It’s much less regulated than other lines of insurance and tends to include exclusions for things consumers believe they’re covered for.” |
Though the rules vary by state, most standard policies sold in the United States provide predeparture cancellation and trip interruption for unforeseen problems that are specifically named, including job loss, an illness that prevents you from traveling or cuts a trip short, a death in the family, a missed flight connection that, in turn, leads to a missed cruise departure, and so on. | Though the rules vary by state, most standard policies sold in the United States provide predeparture cancellation and trip interruption for unforeseen problems that are specifically named, including job loss, an illness that prevents you from traveling or cuts a trip short, a death in the family, a missed flight connection that, in turn, leads to a missed cruise departure, and so on. |
But there is a long list of exclusions that render the insurance void, including terrorist attacks, war and claims associated with psychological disorders, or risky adventure sports like skydiving. | But there is a long list of exclusions that render the insurance void, including terrorist attacks, war and claims associated with psychological disorders, or risky adventure sports like skydiving. |
When a threat becomes “foreseen” —— for example, once a brewing storm becomes a named hurricane, or a global health threat becomes a named pandemic — it is uninsurable, unless you bought the policy before the threat is named. | When a threat becomes “foreseen” —— for example, once a brewing storm becomes a named hurricane, or a global health threat becomes a named pandemic — it is uninsurable, unless you bought the policy before the threat is named. |
If you contracted Covid-19, which prevented you from traveling, and held travel insurance before the date the viral infection became a known threat, the insurance would have covered your cancellation. Allianz Global Assistance, the largest travel insurance company, uses Jan. 22 as the known date. Travel Guard, another major player, uses March 11, the date the World Health Organization declared Covid-19 a pandemic. | If you contracted Covid-19, which prevented you from traveling, and held travel insurance before the date the viral infection became a known threat, the insurance would have covered your cancellation. Allianz Global Assistance, the largest travel insurance company, uses Jan. 22 as the known date. Travel Guard, another major player, uses March 11, the date the World Health Organization declared Covid-19 a pandemic. |
But for travelers who canceled in the current Covid-19 crisis, these insurance companies pointed to their list of things that were covered — a death in the family, job loss, etc. — which did not include pandemics. | But for travelers who canceled in the current Covid-19 crisis, these insurance companies pointed to their list of things that were covered — a death in the family, job loss, etc. — which did not include pandemics. |
“Travel insurance is pitched as something simple, take it or leave it, but it’s a complex insurance policy and there’s all sorts of limitations,” said Birny Birnbaum, the executive director of the Center for Economic Justice, a nonprofit that advocates for equal access to economic opportunity. “You have to read 20 or 30 pages of policy to find out and understand what’s covered.” | “Travel insurance is pitched as something simple, take it or leave it, but it’s a complex insurance policy and there’s all sorts of limitations,” said Birny Birnbaum, the executive director of the Center for Economic Justice, a nonprofit that advocates for equal access to economic opportunity. “You have to read 20 or 30 pages of policy to find out and understand what’s covered.” |
The accumulation of unredeemable policies in the pandemic suggested an exploitive practice to Representative Raja Krishnamoorthi. In March, the Illinois Democrat and chairman of the House Oversight and Reform Subcommittee on Economic and Consumer Policy opened a congressional investigation into profiteering by travel insurance companies. | The accumulation of unredeemable policies in the pandemic suggested an exploitive practice to Representative Raja Krishnamoorthi. In March, the Illinois Democrat and chairman of the House Oversight and Reform Subcommittee on Economic and Consumer Policy opened a congressional investigation into profiteering by travel insurance companies. |
“The burden should be on the insurance company and the brokers to make clear what they’re selling,” said Brendan M. Bridgeland, the director of the Center for Insurance Research, a consumer advocacy organization. “Because that’s where people are getting the idea that, ‘I buy this I’m protected,’ and that simply is not the case if you read the policy.” | “The burden should be on the insurance company and the brokers to make clear what they’re selling,” said Brendan M. Bridgeland, the director of the Center for Insurance Research, a consumer advocacy organization. “Because that’s where people are getting the idea that, ‘I buy this I’m protected,’ and that simply is not the case if you read the policy.” |
Maurizio Howard of Parker, Colo., thought he was covered for his daughter’s school trip to the Dominican Republic because he paid $165 for travel insurance in the $2,955 trip fee. When the March 14 trip was canceled because of the pandemic, the operator, EF Tours, offered three options: Move the dates to the following year; accept a voucher for future travel that the family could resell; or take a refund, minus $1,000 in expenses that it did not enumerate. | Maurizio Howard of Parker, Colo., thought he was covered for his daughter’s school trip to the Dominican Republic because he paid $165 for travel insurance in the $2,955 trip fee. When the March 14 trip was canceled because of the pandemic, the operator, EF Tours, offered three options: Move the dates to the following year; accept a voucher for future travel that the family could resell; or take a refund, minus $1,000 in expenses that it did not enumerate. |
That was within EF Tour’s rights, as outlined in the fine print of its trip contract. The company “retains the right to cancel, modify, or delay the tour as a result of … public health issues or quarantine or threats of public health issues…” Canceled tours would trigger a voucher for future travel minus a $95 nonrefundable deposit and “any additional nonrefundable fees.” | That was within EF Tour’s rights, as outlined in the fine print of its trip contract. The company “retains the right to cancel, modify, or delay the tour as a result of … public health issues or quarantine or threats of public health issues…” Canceled tours would trigger a voucher for future travel minus a $95 nonrefundable deposit and “any additional nonrefundable fees.” |
Because Mr. Howard feared that filing an insurance claim might hurt his chances of persuading the company to refund the trip, I asked his travel insurer if it would reimburse him the $1,000. Crum & Forster, the parent company of United States Fire Insurance Company, which underwrote the policy, responded via email that the booking terms are “a direct contractual arrangement between EF and their customer and is not related to the Travel Protection Plan.” In other words, no. | Because Mr. Howard feared that filing an insurance claim might hurt his chances of persuading the company to refund the trip, I asked his travel insurer if it would reimburse him the $1,000. Crum & Forster, the parent company of United States Fire Insurance Company, which underwrote the policy, responded via email that the booking terms are “a direct contractual arrangement between EF and their customer and is not related to the Travel Protection Plan.” In other words, no. |
The upshot: The conditions under which you can claim trip cancellation benefits are not only narrow, but they don’t cover penalty fees imposed by tour companies. | The upshot: The conditions under which you can claim trip cancellation benefits are not only narrow, but they don’t cover penalty fees imposed by tour companies. |
Travelers who wanted to cancel trips as Covid-19 gathered steam, but before travel was shut off by governments across the globe, were often told that their travel insurance did not cover canceling out of fear — unless they had purchased a cancel for any reason insurance upgrade, or C.F.A.R. | Travelers who wanted to cancel trips as Covid-19 gathered steam, but before travel was shut off by governments across the globe, were often told that their travel insurance did not cover canceling out of fear — unless they had purchased a cancel for any reason insurance upgrade, or C.F.A.R. |
With C.F.A.R., a traveler is able to back out any time until a few days before departure and get some money back, usually 50 to 75 percent. It’s more expensive than regular travel insurance and must be purchased within a short window after making the initial trip deposit, usually less than 21 days. Additionally, the policy only covers cancellations up to two or three days before the trip. | With C.F.A.R., a traveler is able to back out any time until a few days before departure and get some money back, usually 50 to 75 percent. It’s more expensive than regular travel insurance and must be purchased within a short window after making the initial trip deposit, usually less than 21 days. Additionally, the policy only covers cancellations up to two or three days before the trip. |
Using Travel Guard’s website, I priced insurance on a $10,000 trip to France. Its basic policy costs about $500 to insure. But to get C.F.A.R., I would have to take the “preferred” policy at about $554. Adding the C.F.A.R. option offering 50 percent back, cost $128, for a total of $682. If I canceled because of the pandemic, or for any other reason, I would only get $5,000 back, half of the insured amount. Less the premium, that’s $4,318 net. | Using Travel Guard’s website, I priced insurance on a $10,000 trip to France. Its basic policy costs about $500 to insure. But to get C.F.A.R., I would have to take the “preferred” policy at about $554. Adding the C.F.A.R. option offering 50 percent back, cost $128, for a total of $682. If I canceled because of the pandemic, or for any other reason, I would only get $5,000 back, half of the insured amount. Less the premium, that’s $4,318 net. |
Cancel for any reason, Mr. Birnbaum said, “is treated as insurance, but it’s not really. Insurance is protection against some fortuitous event.” This policy, he said, covers a decision that’s in your control — such as changing your mind about taking a trip — not a risk that’s out of your control, like a car accident. | Cancel for any reason, Mr. Birnbaum said, “is treated as insurance, but it’s not really. Insurance is protection against some fortuitous event.” This policy, he said, covers a decision that’s in your control — such as changing your mind about taking a trip — not a risk that’s out of your control, like a car accident. |
Mollie Fitzgerald, a travel adviser in Gibsonia, Pa., rarely recommends C.F.A.R. because it’s expensive — it can be 35 to 50 percent more than regular travel insurance, she said — and becomes more expensive the older you are, while only covering a maximum of 75 percent of the trip. | Mollie Fitzgerald, a travel adviser in Gibsonia, Pa., rarely recommends C.F.A.R. because it’s expensive — it can be 35 to 50 percent more than regular travel insurance, she said — and becomes more expensive the older you are, while only covering a maximum of 75 percent of the trip. |
“Occasionally, a trial lawyer or someone like that whose calendar is fluid will request C.F.A.R., but it’s less than 1 percent of our insurance sales,” she wrote in an email. | “Occasionally, a trial lawyer or someone like that whose calendar is fluid will request C.F.A.R., but it’s less than 1 percent of our insurance sales,” she wrote in an email. |
But for many travelers, something is better than nothing. Edward Chan of Rancho Palos Verdes, Calif., spent $552 on an insurance policy with C.F.A.R. through Travel Insured International that offered 75 percent back on a $13,000 family cruise. During the pandemic, he canceled before the final payment was due and got his money back, except for a $1,000 nonrefundable fee. | But for many travelers, something is better than nothing. Edward Chan of Rancho Palos Verdes, Calif., spent $552 on an insurance policy with C.F.A.R. through Travel Insured International that offered 75 percent back on a $13,000 family cruise. During the pandemic, he canceled before the final payment was due and got his money back, except for a $1,000 nonrefundable fee. |
Making an insurance claim through Travel Insured International, he got $750 of that fee back. | Making an insurance claim through Travel Insured International, he got $750 of that fee back. |
“So it was worth it for me to make the claim,” he wrote via Twitter, noting it took two hours on the phone with an agent two months after making the claim to get the refund approved. | “So it was worth it for me to make the claim,” he wrote via Twitter, noting it took two hours on the phone with an agent two months after making the claim to get the refund approved. |
The upshot: Cancel for any reason is a luxury option, that may be worth it to protect a large investment. But even then you only get a fraction back. | The upshot: Cancel for any reason is a luxury option, that may be worth it to protect a large investment. But even then you only get a fraction back. |
Airlines also act as travel insurance brokers, offering coverage by third parties every time you buy a ticket online. During the transaction, most carriers have a mandatory yes or no question about buying insurance and then add the cost of the policy, if accepted, to the ticket price. Answering “yes,” Kathryn Franz of Marion, N.Y., bought two nonrefundable fares on Delta.com for a September trip to several national parks in Utah to celebrate her 70th birthday. She bought insurance on the $1,193 tickets with Allianz Global Assistance for $94. | Airlines also act as travel insurance brokers, offering coverage by third parties every time you buy a ticket online. During the transaction, most carriers have a mandatory yes or no question about buying insurance and then add the cost of the policy, if accepted, to the ticket price. Answering “yes,” Kathryn Franz of Marion, N.Y., bought two nonrefundable fares on Delta.com for a September trip to several national parks in Utah to celebrate her 70th birthday. She bought insurance on the $1,193 tickets with Allianz Global Assistance for $94. |
Though the trip is still months away, Ms. Franz has decided she is not comfortable taking it. “Both my husband and I are in the ‘at risk’ demographic due to age, but he also has diminished lung capacity due to having been a smoker for so long,” she wrote in an email. “I feel it is prudent to cancel the trip to protect ourselves from risk.” | Though the trip is still months away, Ms. Franz has decided she is not comfortable taking it. “Both my husband and I are in the ‘at risk’ demographic due to age, but he also has diminished lung capacity due to having been a smoker for so long,” she wrote in an email. “I feel it is prudent to cancel the trip to protect ourselves from risk.” |
Checking her policy, she discovered she would not be covered if she canceled the flight because of the pandemic. (However, Delta later changed the couple’s itinerary, and offered a credit to use in future if they elected not to take the trip.) | Checking her policy, she discovered she would not be covered if she canceled the flight because of the pandemic. (However, Delta later changed the couple’s itinerary, and offered a credit to use in future if they elected not to take the trip.) |
“Concern over the potential to become ill is not a listed reason that would trigger coverage,” an Allianz spokesman, Daniel Durazo, wrote in an email. | “Concern over the potential to become ill is not a listed reason that would trigger coverage,” an Allianz spokesman, Daniel Durazo, wrote in an email. |
Recently, American Airlines offered me a $25 insurance policy, marked “recommended,” on a $388 flight from Chicago to San Francisco. If I declined, I had to click: “No, I choose not to protect my $388.30 purchase and I understand by declining coverage I may be responsible for cancellation fees and delay expenses.” | Recently, American Airlines offered me a $25 insurance policy, marked “recommended,” on a $388 flight from Chicago to San Francisco. If I declined, I had to click: “No, I choose not to protect my $388.30 purchase and I understand by declining coverage I may be responsible for cancellation fees and delay expenses.” |
The question injects anxiety into every ticket purchase, suggesting airlines have a financial interest in the sales. Allianz would not disclose the terms it has with the airlines. Several airlines didn’t respond to the inquiry. | The question injects anxiety into every ticket purchase, suggesting airlines have a financial interest in the sales. Allianz would not disclose the terms it has with the airlines. Several airlines didn’t respond to the inquiry. |
“They thrust this product in front of you on every online ticket purchase,” said Shawn Guertin, of Barrington, R.I., who assumed the tickets he canceled on Hawaiian Airlines in March because of the coronavirus were covered by the insurance he bought at booking; Allianz denied the claim, writing in a letter, “Your plan excludes coverage for losses due to an epidemic.” | “They thrust this product in front of you on every online ticket purchase,” said Shawn Guertin, of Barrington, R.I., who assumed the tickets he canceled on Hawaiian Airlines in March because of the coronavirus were covered by the insurance he bought at booking; Allianz denied the claim, writing in a letter, “Your plan excludes coverage for losses due to an epidemic.” |
“Regardless of what the fine print says, at a minimum it’s a very deceptive business practice,” he said. | “Regardless of what the fine print says, at a minimum it’s a very deceptive business practice,” he said. |
When buying any insurance, experts advise, ignore third parties — in this case, the airlines. | When buying any insurance, experts advise, ignore third parties — in this case, the airlines. |
“You can purchase a policy for the same flight on your own and it will probably be cheaper,” Mr. Bridgeland said. | “You can purchase a policy for the same flight on your own and it will probably be cheaper,” Mr. Bridgeland said. |
While I priced insurance on that San Francisco flight at Allianz for $20, it lacked some benefits in the $25 airline policy, making an exact comparison difficult. | While I priced insurance on that San Francisco flight at Allianz for $20, it lacked some benefits in the $25 airline policy, making an exact comparison difficult. |
In addition, most flight insurance includes benefits you often don’t need to pay for. In the case of lost, damaged or delayed baggage, the U.S. Department of Transportation makes the airline responsible for reimbursement up to a maximum of $3,500 on a domestic flight, typically more than travel insurance stipulates. Additionally, if an airline cancels your flight or makes a significant schedule change, it owes you a refund regardless of insurance. | In addition, most flight insurance includes benefits you often don’t need to pay for. In the case of lost, damaged or delayed baggage, the U.S. Department of Transportation makes the airline responsible for reimbursement up to a maximum of $3,500 on a domestic flight, typically more than travel insurance stipulates. Additionally, if an airline cancels your flight or makes a significant schedule change, it owes you a refund regardless of insurance. |
The upshot: Flight insurance, like travel insurance, is good under only a limited set of circumstances, such as job loss. Ignore the airline website hype. | The upshot: Flight insurance, like travel insurance, is good under only a limited set of circumstances, such as job loss. Ignore the airline website hype. |
Most travel insurance policies cover trip cancellation from the time of purchase to the day of departure for reasons like sickness or severe weather. They typically include a “free look” period after purchase, usually 10 to 15 days, during which time travelers can cancel for a full refund of the premium. After that, no dice. | Most travel insurance policies cover trip cancellation from the time of purchase to the day of departure for reasons like sickness or severe weather. They typically include a “free look” period after purchase, usually 10 to 15 days, during which time travelers can cancel for a full refund of the premium. After that, no dice. |
When Royal Caribbean canceled Valerie Pedersen’s May cruise to Bermuda because of the pandemic, she was offered a refund. But Ms. Pedersen also wanted her $400 insurance premium back from Travel Guard insuring a trip that wasn’t to be. | When Royal Caribbean canceled Valerie Pedersen’s May cruise to Bermuda because of the pandemic, she was offered a refund. But Ms. Pedersen also wanted her $400 insurance premium back from Travel Guard insuring a trip that wasn’t to be. |
Travel Guard offered Ms. Pedersen a rollover. | Travel Guard offered Ms. Pedersen a rollover. |
On April 13, the company wrote her that she was beyond the free-look stage that would trigger a refund of the premium. “It is our policy that all premium refund requests must be submitted within 15 days of the effective date of the policy, however, we are pleased to offer you a travel insurance credit voucher in the amount of $413.92,” it wrote. | On April 13, the company wrote her that she was beyond the free-look stage that would trigger a refund of the premium. “It is our policy that all premium refund requests must be submitted within 15 days of the effective date of the policy, however, we are pleased to offer you a travel insurance credit voucher in the amount of $413.92,” it wrote. |
“Pretty cheesy, I think, as I could use the actual cash now,” Ms. Pedersen said. | “Pretty cheesy, I think, as I could use the actual cash now,” Ms. Pedersen said. |
Offering rollovers has been the industry’s exception to its policy of no refunds after the free-look period. Decisions on how to handle policy refunds versus rollovers have varied in the pandemic. Allianz said it is allowing customers whose trips have been canceled because of Covid-19 by their travel operator — be it a cruise line, airline or tour company — to cancel their insurance and get a refund of the premium. | Offering rollovers has been the industry’s exception to its policy of no refunds after the free-look period. Decisions on how to handle policy refunds versus rollovers have varied in the pandemic. Allianz said it is allowing customers whose trips have been canceled because of Covid-19 by their travel operator — be it a cruise line, airline or tour company — to cancel their insurance and get a refund of the premium. |
The upshot: Much depends on the policy, but the fact that insurance companies are reacting differently means it’s a good time to be the squeaky wheel and demand a refund. | The upshot: Much depends on the policy, but the fact that insurance companies are reacting differently means it’s a good time to be the squeaky wheel and demand a refund. |
In the pandemic, travelers learned they can insure themselves for unforeseeable but relatively routine disasters — like getting hurt in a car accident, needing emergency gall bladder surgery or losing a job — but not the ones that seemed like a sci-fi scenario two months ago. | In the pandemic, travelers learned they can insure themselves for unforeseeable but relatively routine disasters — like getting hurt in a car accident, needing emergency gall bladder surgery or losing a job — but not the ones that seemed like a sci-fi scenario two months ago. |
One way to make sure your money is protected is to pay more for refundable airline tickets — as long as they’re not worth more than the fees to change them — and carefully read the fine print on tour, cruise and hotel cancellation and refund terms, as well as travel insurance policies. | One way to make sure your money is protected is to pay more for refundable airline tickets — as long as they’re not worth more than the fees to change them — and carefully read the fine print on tour, cruise and hotel cancellation and refund terms, as well as travel insurance policies. |
“So many travel insurance policies are set up for consumers to lose,” said Ms. Balber of Consumer Watchdog, noting that policies including medical coverage abroad, where your own health insurance may not kick in, may be worthwhile. “But the devil is in the details and that is doubly true when it comes to travel insurance.” | “So many travel insurance policies are set up for consumers to lose,” said Ms. Balber of Consumer Watchdog, noting that policies including medical coverage abroad, where your own health insurance may not kick in, may be worthwhile. “But the devil is in the details and that is doubly true when it comes to travel insurance.” |
Follow New York Times Travel on Instagram, Twitter and Facebook. And sign up for our weekly Travel Dispatch newsletter to receive expert tips on traveling smarter and inspiration for your next vacation. | Follow New York Times Travel on Instagram, Twitter and Facebook. And sign up for our weekly Travel Dispatch newsletter to receive expert tips on traveling smarter and inspiration for your next vacation. |